This piece is sponsored by Colliers.
A Colliers report says luxury fashion retail has emerged from an initial pandemic malaise with more revenues, an increasingly diverse clientele, and renewed appreciation for the branding and sensory experiences possible with brick and mortar retail venues.
“Lux is healthy, like grocery, with revenue flourishing to pre-pandemic levels,” said Anjee Solanki, National Director of Retail Services & Practice Groups at Colliers. “And, there’s no sign of luxury retail revenue sales slowing down.”
The industry is seeing a healthier, robust market for the luxury retailer, with an increase of locations in dense, urban, 24-hour-type markets around the globe. Domestically, lux locations should be in feeder cities, niche markets frequented by international travelers.
“Retailers in this space seek a statement storefront that reflects the museum-like store experience. Lux retailers create an experience from the curb in. They want a prominent location, and clustering with other distinguished lux retailers, at a corner or end of the block, with very high ceilings that exude grandeur,” Solanki said. “Their approach is on another level, white glove.”
Although some of those curbs have devolved, with the addition of fast-fashion retailers, high-end luxury retailers are looking to regain their curb prestige by shifting location. As an example, Chicago has seen lux retailers move from Michigan Avenue, Solanki said. Other retailers are moving inward from the coasts, establishing a more significant presence in cities like Austin, Dallas, Phoenix and Atlanta.
The clustering of lux has also grown popular in malls and outlet locations, whose lux retailers are frequented by consumers 57.3% and 55.6%, respectively, according to Collier’s report on The Global Outlook for Luxury Retail.
“The spending shift has luxury brands exploring collaboration opportunities with high-end emerging concepts such as street wear to capture a broader and younger audience,” Solanki said. “Lux brands are more likely to return to malls with an upgraded luxury wing that showcases new retail concepts.”
One of her favorite sensory concepts came from Seoul-based eyeglass retailer Gentle Giant, which recently created a pop-up store with an Italian clothing retailer. The campaign, which launched the accessories brand’s Swipe collection, looks to connect the human and digital experience speaking to the swiping left-to-right culture of mobile apps.
Solanki suspects that consumers find the accessibility of mall and outlet locations more appealing, especially for shoppers who may feel less comfortable visiting a flagship store. Flagships cater to the very wealthy, although the new lux consumers may not be. Colliers’ report notes that 10% of people earning between $50,000 and $80,000 annually regularly shop for luxury items.
Lux consumers also might not have been born in America. In the U.S., the lux consumer growth is greatest among immigrants, most notably from Asian countries, where luxury sales are growing fastest, Solanki said. Solanki repeatedly witnesses how immigrant customers buy lux in multiples.
“They are not buying just for themselves but their entire family. We are seeing a significant growth in certain demographics, ie. Hispanic, Asian and their sub demographics, buying power and multi-generational purchases. So often, luxury items are treated as heirloom pieces passed down from one generation to the next,” Solanki shared.
The global luxury industry grew by 14% YoY in 2021, with notable growth in the U.S. and China, with retailers assessing which market to bet on for the future. The U.S. reported $64.5 billion in lux sales globally in 2019 and anticipates 3.8% growth in the next two years. Meanwhile, China is becoming the world’s largest luxury goods market by 2025, with an estimated 6.2% growth.
One core solution leverages a more consistent online presence. According to the report, online portals and e-commerce sites are no longer threats to physical stores. Instead, they create a holistic omnichannel approach that provides an alternate channel to raising consumer awareness.
The emergence of a new generation of lux-conscious buyers influenced by social media and the allure of the metaverse is sure to inject continued growth into the lux market. Combined with double-digit population growth across lux market cities and shared brand loyalties among immigrant family members in the luxury goods experience, the sector is expected to maintain healthy growth for the foreseeable future.
As Head of Retail & Practice Groups for the US, Anjee Solanki ([email protected]) brings 30 years of focused retail real estate experience to Colliers. She provides strategic retail advisory services to enhance value for her clients with her expertise in lifestyle, community, power center, neighborhood, mixed-use retail/residential, and resort retail.